India Embraces Pakistan Trade Plan as Rivals Boost Ties

March 1 (Bloomberg) -- India embraced Pakistan’s plan to
dismantle trade barriers for exports to its neighbor, auguring
closer economic ties between the South Asian nations that have
fought three wars since attaining independence six decades ago.

“Flourishing trade is the biggest confidence building
measure among any two nations” and improved economic engagement
will help build peace and stability, India’s Trade Minister
Anand Sharma said in a statement yesterday. Sharma visited
Pakistan last month.

Pakistan’s cabinet approved a proposal to remove
restrictions on prohibited imports from India by December,
according to a statement from Pakistan Prime Minister Yousuf
Raza Gilani’s media office yesterday.

The nuclear-armed rivals agreed last year to broaden the
number of goods that can be traded between the countries and to
grant more business visas as they move to normalize economic
ties that have been hampered by distrust and hostility since
they gained independence from British colonial rule in 1947.
They vowed to dismantle tariffs on about 8,000 items by the end
of this year, with all restrictions being lifted by 2013.

“The next big step we need to see is how quickly both
countries bridge the trust deficit and do away with the non-tariff barriers,” said Sakib Sherani, chief executive
officer at Macroeconomic Insights Pvt. in Islamabad and a
former economic adviser to Pakistan’s Finance Ministry. “In the
interim, India will benefit more than Pakistan because of its
industrial strength.”

After Pakistan’s cabinet decision yesterday, the country
will do away with a list of 1,209 items by December that traders
weren’t allowed to import from India, Gilani’s office said in
the statement.

“The process of trade normalization between the two
countries will be completed after this step,” it said.

Trade between the two countries was $2.7 billion in the
year ended March 31, according to India’s commerce ministry.

India and Pakistan agreed to resume peace talks in February
2011, after a break in the process as a result of the terrorist
attack on Mumbai in 2008 by 10 Pakistani militants. India said
it’s continuing to press Pakistan to dismantle guerrilla groups
based on its soil and targeting India.

India and Pakistan have fought three wars, two of them over
their conflicting claims to the territory of Kashmir. The two
countries agreed in July to expand trade and travel between the
parts of Kashmir they control.